Council of Trade Unions media release
13 October 2010

Government has room to do more on stalling economy

There is clearly still room for fiscal stimulus for an economy that is not going anywhere, and in fact is getting smaller per New Zealander, said the CTU today. The Government Financial Statements for the year ended in June show an operating deficit over $1 billion lower than forecast in the 2009 Budget – $1.2 billion less in the Operating Balance; and $1.4 billion before gains and losses.

Bill Rosenberg, CTU Economist and Policy Director said: “The Minister of Finance says the very slow recovery is due to people reducing borrowing on their homes instead of spending on goods and services. However, we cannot be confident this is a trend rather than a sign of people’s concern about the future and the difficulty in borrowing. A stimulus could be applied in ways that improved our infrastructure and people’s housing.”

The Minister of Finance acknowledged that New Zealand’s government debt position was significantly better than other OECD countries, which average the equivalent of 100 percent of GDP. New Zealand’s net government debt is forecast to peak around 30 percent of GDP. At June 2010 it was 14.1 percent of GDP – significantly less than the 15.6 percent of GDP expected in the 2009 Budget. Gross debt is 28.3 percent of GDP compared to 29.1 percent forecast.

Net borrowing for the year was less than the figure of ‘$240 million per week over the next four years’ regularly used by the Government. In fact net borrowing was $161 million per week during the year, after repayment of older debt.